Thesis: Nature of Relationship between Growth and FDI

Sample Thesis Paper

The purpose of this study as mentioned earlier was to explore the nature of relationship between growth and FDI and to see whether or not both of these significantly affect growth as measured by GDP. The results obtained through running a regression equation using Ordinary Least Squares point out that there is a significantly positive relationship between growth and FDI and one between FDI and development as well.

This means the varying amounts and combinations of both of these will affect the level of growth in a country. The positive relationship implies that FDI can be used as a tool to attain higher levels of economic growth. The use of FDI along with well-developed financial systems can prompt growth which again brings us to the question of growth complements development.

To explore the nature of this relationship, we performed Augmented Dicky Fuller Test to test the data for stationarity before we run the OLS regression equation and before we applied the Granger Causality Test to our time-series data. The Granger Causality Test confirmed that growth does, in fact, granger-cause development. This confirmation points out that FDI, thus, can be used as a tool for government policy to enhance the level and quality of economic activity in a country, or more particularly in Angola.

Also, our empirical analysis has not only confirmed the complementary nature of the growth-FDI linkage, it has also, by exploring their link to GDP, enhanced upon the importance of using FDI as a tool for economic growth.

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